We Told You So: Nation’s Largest Employer Scales Back Health Coverage

Over the weekend, more details emerged about how Obamacare is transforming the American workforce – and not for the better.  The New York Times reported on many small firms not hiring new workers, or scaling back hours for existing workers, to avoid the law’s new taxes.  And the Huffington Post reported that Wal-Mart has changed its employment policy, eliminating health insurance benefits for new part-time workers – thereby dumping them on to Obamacare’s exchanges:

Walmart, the nation’s largest private employer, plans to begin denying health insurance to newly hired employees who work fewer than 30 hours a week, according to a copy of the company’s policy obtained by The Huffington Post.  Under the policy, slated to take effect in January, Walmart also reserves the right to eliminate health care coverage for certain workers if their average workweek dips below 30 hours.…

Labor and health care experts portrayed Walmart’s decision to exclude workers from its medical plans as an attempt to limit costs while taking advantage of the national health care reform known as Obamacare….“Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan, which is one of the problems with the way the law is structured,” said Ken Jacobs, chairman of the Labor Research Center at the University of California, Berkeley.

“Walmart likely thought it didn’t need to offer this part-time coverage anymore with Obamacare,” said Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara.  “This is another example of a tremendous government subsidy to Walmart via its workers.”

In pursuing lower health care costs, Walmart is following the same course as many other large employers. But given its unrivaled scale, Walmart’s policies tend to influence American working conditions more broadly.  Tom Billet, a senior consultant at Towers Watson, a professional services firm that works with large companies to develop benefit plans, said other companies are also crafting policies that will exclude some part-time workers from medical coverage.  Billet portrayed the growing corporate interest in separating out part-time workers as a reaction to another aspect of Obamacare – the new rules that require companies with at least 50 full-time workers to offer health coverage to all employees who work 30 or more hours a week or pay penalties.

One major bottom-line question in this development relates to how many more people will be added to government health rolls by this apparent trend.  In last month’s job data, the Bureau of Labor Statistics estimated nearly 28 million Americans work part-time – defined by the BLS as fewer than 35 hours per week.  Using Obamacare’s less stringent 30 hours per week standard would reduce that 28 million number somewhat – and many part-time workers do not have access to employer-provided health insurance currently.  (Of firms offering insurance to their employees, 28% extend that offer to part-time workers as well – a fact which only indirectly illuminates the number of part-time workers receiving insurance coverage from their employer.)

All that said, the point remains that millions – and perhaps tens of millions – of part-time workers who currently receive insurance from their employers could lose it due to Obamacare – and federal taxpayers will be stuck paying the bill.  That’s not “reform,” and it’s not a change millions of American workers, to say nothing of American taxpayers, can believe in.

More Bad News for American Patients

Earlier this week consultants at Towers Watson, in conjunction with the National Business Group on Health, released their annual survey of large employers offering health insurance.  And the results are not encouraging for businesses or employees:

Higher Costs:  “Employers anticipate total health care costs will reach $11,664 per active employee in 2012, up from $10,982 in 2011 — a 6.2% increase in total costs over the period.”

Higher Premiums:  “Employees, on average, paid 23.0% of total premium costs in 2011 and are expected to pay 23.7% in 2012, as companies take steps to control their costs.  In paycheck deductions, this translated into an average employee contribution of $2,529 to premiums in 2011, which is expected to rise to $2,764 in 2012 — a 9.3% increase in one year.”

Higher Out-of-Pocket Charges:  “The share of total health care expenses paid by employees, including premium and out-of-pocket costs, is expected to be 34.4% in 2012, up from 33.2% in 2011.”

Employers Dropping Retiree Coverage:  “If [Obamacare] works as intended, the health insurance market in 2014 and beyond will become an attractive alternative and further push companies to exit sponsorship of their pre-65 programs.”

Employers Dropping Workers’ Coverage:  “Nearly one in five companies is likely to offer health care coverage to a subset of its workforce and direct the remainder of its employees to the insurance Exchanges.”

Employers Less Confident about Offering Coverage:  “Against the backdrop of [Obamacare], companies have never been more uncertain about the future of their health care programs over the long term….With the health care marketplace changing rapidly and parts of [Obamacare] already starting to take effect, employer confidence is at its lowest point (23%) since we began tracking this data.”

Businesses Bogged Down by Paperwork:  Nearly one in six firms (15%) cited the cost of Obamacare compliance as one of the “biggest challenges to maintaining affordable benefit coverage.”

Firms Reducing Employee Hours:  “Nearly 40% of companies that traditionally use a high number of part-time workers expect to limit them to less than 30 hours per week by 2014 to escape having to pay benefits.”

The report once again illustrates Obamacare’s broken promises – instead of premiums going down by $2,500, they continue to skyrocket, even as individuals are unable to maintain their prior coverage.  It’s yet another example of the way in which Obamacare has failed to deliver for the American people.

Survey Shows How Obamacare Is Making Things Worse

Lost in all the publicity surrounding the two-year anniversary of Obamacare and the Supreme Court arguments regarding same was an interesting study revealing once again how the 2700-page law has fallen short.  The annual Towers Watson survey of health plans, released last month, again showed how the law is harming millions of Americans this year, and causing more employers to think about dropping coverage in the future:

Higher Costs:  Costs per employee will rise by $682 this year – imposing new costs on struggling businesses and families alike.  Costs would have risen even higher, but for the fact that employers also increased cost-sharing and made other plan changes.

Higher Premiums:  The employee share of premium costs will go up by 9.4%.  Recall that candidate Obama promised repeatedly that premiums would go DOWN by $2,500 per family under his plan.

Higher Cost-Sharing:  Out-of-pocket expenses for employees increased from 16% to 18%, and the total employee cost share (premiums plus out-of-pocket costs) also rose, from 33.2% to 34.4%.

Higher Regulatory Burden:  More than one in seven (15%) employers listed the cost of compliance and regulatory burdens under Obamacare as one of the biggest challenges to maintaining affordable coverage.

Lower Hours for Workers:  “Nearly 40% of companies that traditionally use a high number of part-time workers expect to limit them to less than 30 hours per week by 2014 to escape having to pay benefits.”

Employers Dumping Coverage, Part I:  Fewer than one in four (23%) employers said they are very confident they will continue to offer health benefits for the next ten years – that’s a drop of a whopping fifty points from the 73% number who planned to keep offering coverage five years ago.

Employers Dumping Coverage, Part II:  More than two in five (42%) employers are at least somewhat likely to direct part-time and temporary workers into Exchanges.

Employers Dumping Coverage, Part III:  More than two in five (41%) employers are at least somewhat likely to “structure [employer health insurance] contributions to facilitate availability of federal subsidies in the Exchange for low-wage earners.”

Employers Dumping Coverage, Part IV:  A majority (53%) of employers plan to eliminate retiree drug coverage by 2014 or 2015, sending their retirees into taxpayer-funded plans instead.

The results of the Towers Watson survey once again illustrate how Obamacare has failed to control costs, produced new and costly mandates for businesses, and thereby encouraged firms to dump their health coverage once Exchanges come online in 2014.  In short, the unpopular law has made things worse for millions of struggling Americans.

Another Survey Documents Rising Costs — and Employers Dropping Coverage

The HR firm Towers Watson today released a survey of large employers regarding health coverage.  Once again the results show that Obamacare is NOT following through on the promise to reduce costs – but IS encouraging employers to think about dropping their insurance offerings:

Higher Costs:  Overall plan costs are projected to rise at a 5.9% rate in 2012, well above the rate of inflation.

Lose Your Plan Now:  Seven out of 10 (70%) employers expect to lose grandfathered health status in 2012 – meaning employees will lose their current health plan, and employers will be subject to a blizzard of new regulations and mandates under Obamacare.

Lose Your Plan Later:  Nearly three in ten employers (29%) are unsure whether or not they will continue offering coverage to their current workers thanks to Obamacare.  More than half (54%) of employers currently offering coverage to retirees plan to drop that coverage.

Higher Premiums Now:   A majority of firms plan to raise the employee share of premium contributions in 2012 by at least one percentage point (66%) – with 20% planning to raise single-only coverage premiums by more than 5%, and 29% planning to raise family coverage premiums by more than 5%.  Despite candidate Obama’s repeated promises to CUT premiums for all Americans by an average $2,500 per household, only 1% of firms plan to decrease the employee share of premium contributions.

Higher Premiums Later:  Thanks to Obamacare, nearly half (47%) of employers plan to “substantially reduce the health care benefit value of active employees,” in 2014 and 2015, and an even greater percentage (57%) plan to “reduce employee contributions for lower-paid workers.”  (That is, of course, if those employers are even offering coverage at all by that point.)

Today’s survey once again documents how Obamacare has failed to live up to its promises – and continues to serve as a drag on American businesses and families.

More on Employers Dropping Coverage

Yet another consulting firm has released a survey regarding employers dropping coverage.  In this case, Towers Watson’s annual survey of retiree health coverage found that nearly three in five employers who offer coverage to retirees under age 65 are assessing new alternatives in light of the law.  Nearly nine in ten (87%) of employers responded that the new insurance options available under the law are influencing their strategy for offering benefits to retirees.  Last week’s Associated Press story about how early retirees making as much as $64,000 can receive “nearly free” health care courtesy of federal taxpayers will only further encourage these firms to drop coverage for their former workers.

Meanwhile, Bloomberg Government ran a story Friday about how “employers may prefer paying fines” to offering coverage.  The article indicated that “business groups are dubious” of economic models claiming firms will not drop coverage, “and say the more negative findings” of McKinsey’s health survey “provide a better indication” of employer responses.  Among the reactions in the piece:

  • The National Retail Federation said it is “not bullish on the future of health care coverage in the private sector;”
  • A representative of the Employee Benefit Research Institute said that “even if companies don’t drop their health plans entirely, ‘a significant number’ are looking at alternative arrangements” – which could involve reorganizing their firms so that low-wage workers receive government subsidies in Exchanges, while keeping employer-provided insurance for high-income workers; and
  • A representative from America’s Health Insurance Plans noted that “almost all employers are taking a look at their health care strategy…many will keep their options open, and if their competition drops, they will too.”

A June Gallup poll found nearly 10 million adults have lost employer-based coverage since President Obama was elected President.  These latest surveys once again confirm that, thanks to Democrats’ unpopular health care law, millions more Americans are about to follow suit.

Health “Reform” = Rising Costs, Rising Premiums, Losing Coverage

Towers Watson is out today with an annual survey from the National Business Group on Health about the state of employer-provided health care.  The results are far from the outcomes Democrats promised when the health care law passed – but typical of the consequences millions of Americans have seen since it did:

Higher Costs:  Average cost per active worker rose by 7.6% to reach $11,176 – an increase of nearly $800 in one year alone.  The employee share of costs is projected to rise by double-digits, increasing 11.8% to $2,660.

Higher Premiums:  “Over the last year, employers put more emphasis on increasing premium contributions” – 63% plan increases in employees’ share of premium contributions, and 62% plan premium increases for dependent coverage.

More Bureaucracy:  A whopping 81% of firms said the health care law has increased administrative burdens on their human resources departments.  One in six (16%) firms said the cost of complying with the law is one of their top challenges in maintaining affordable coverage.

Dropping Coverage Now:  In 2012, more than one-quarter (26%) of companies plan to discontinue sponsoring a plan “for at least one segment of current and/or future retirees.”

Dropping Coverage Later:  The number of firms reporting a high confidence that health care benefits will be offered at their organization 10 years from now dropped nineteen points in one year, to its lowest level since the survey began.  More than one in three (35%) firms are currently re-visiting their health care strategy for current employees – meaning they could exit the market.  The vast majority of surveyed employers believe the opening of the Exchanges in 2014 (70%) and the introduction of the “Cadillac tax” in 2018 (81%) will have at least some impact on their current employees.  The report notes that “if the legislation works as intended,” it could “allow…companies to exit sponsorship” of retiree health coverage.  Based on the survey results, it’s also not unrealistic to envision how the law could jeopardize employer coverage as a whole.

A Bitter Pill: How Democrats’ Government Takeover of Health Care Will Lead Employers to Drop Coverage

If You Like Your Current Plan…Tough Luck

President Obama and Democrats in Congress promised that nothing would change for the majority of Americans who currently have health coverage.[i] But a series of developments since the enactment of the health care “reform” law demonstrates how rising costs, new taxes, and additional federal requirements will leave many employers with little choice but to drop their insurance offerings:

  • A recent survey of large employers conducted by the consulting firm Towers Watson found that “the overwhelming majority (90 percent) of employers believe health care reform will increase their organization’s health benefit costs.”[ii]
  • The vast majority of the businesses surveyed by Towers Watson will force their employees to bear the brunt of higher health benefit costs imposed by the new law. Nearly nine in ten (88 percent) of firms plan to pass on increased costs through the form of higher premiums, and nearly three in four (74 percent) plan to change plan options, restrict eligibility, or increase deductibles and co-pays.[iii]
  • According to the Towers Watson survey, more than one in ten employers plan to reduce employment—laying off existing workers, or failing to hire new ones—as a result of the law’s increased costs.[iv]
  • Similarly, a survey of several hundred chief financial officers in small and large businesses found that an overwhelming majority—nearly three in four—believe the health care law will have a negative impact on their companies.[v] These financial officers also believe that the new law will raise, not lower, their firms’ health care costs by an average of more than eight percent.[vi]
  • Findings from the business surveys comport with decisions being made by individual companies as a result of the law’s enactment. Documents subpoenaed by the House Energy and Commerce Committee suggest companies are considering dropping their health plans. For instance, an AT&T document compared the company’s $4.7 billion cost of providing coverage currently to potential tax penalties under the health care law of $600 million for dropping its plan.[vii]
  • Likewise, Caterpillar executives discussed the need to “give serious consideration” to dropping coverage outright,[viii] and noted that the law’s enactment would require the company to “figure out what this will cost us and collect that in increased premiums which we will attribute to the legislation.”[ix]
  • Even retirees will not be immune from losing their existing coverage as a result of the health care law. A study found that a single provision in the health care law—eliminating a tax subsidy for employers who cover their retirees’ pharmaceutical expenses—could result in as many as two million retirees losing their drug coverage.[x]

Particularly given the current economic environment, the massive tax increases, rising health costs, and new regulations included in the health law provide companies with strong incentives to drop their current coverage—and every sign indicates that businesses large and small may do just that. More difficult to explain are why Democrats consider higher premiums, higher costs, and less coverage to be the kind of “reform” the American people can believe in.

 

[i] See, for instance, President Obama’s September 2009 address to Congress, http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care

[ii] Towers Watson survey on health care reform, May 2010, http://www.towerswatson.com/united-states/research/1935, p. 1

[iii] Ibid., p. 4

[iv] Ibid.

[v] Financial Executives International, “CFO Quarterly Outlook Survey,” April 2010, http://www.financialexecutives.org/ferf/download/2010%20final/2010-011.pdf, p. 15

[vi] Ibid., p. 16

[vii] “Health Care Bill Legislation,” AT&T Presentation subpoenaed by House Energy and Commerce Committee, available at http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm

[viii] Caterpillar internal e-mail subpoenaed by House Energy and Commerce Committee, November 19, 2009, CAT_WAXMAN_000361

[ix] Caterpillar internal e-mail subpoenaed by House Energy and Commerce Committee, March 23, 2010, CAT_WAXMAN_000300, available at http://dailycaller.com/2010/04/28/why-waxman-really-canceled-his-health-care-%E2%80%98show-trial%E2%80%99/

[x] “Assessing the Coverage and Budgetary Implications of Legislation Modifying the Deductibility of Retiree Drug Spending Eligible for Subsidies,” American Benefits Council report by The Moran Company, March 16, 2010, http://www.americanbenefitscouncil.org/documents/hcr_rds-report_031610.pdf, p. 5

New Study Confirms: Health Law Will Raise Costs, Lower Coverage for Employers

Consulting firm Towers Watson is out with a new study today of large employers and their response to the health care law.  The major findings are interesting, but not at all surprising, to Republicans who raised these concerns months ago:

  • “The overwhelming majority (90%) of employers believe health care reform will increase their organization’s health care benefit costs;”
  • Only 14% of firms surveyed believe the law will contain health care costs for the nation as a whole;
  • More than two in three firms (68%) plan to re-examine their health benefit strategy for active employees this year;
  • Nearly nine in ten firms (88%) plan to pass increased costs from the law on to their employees through higher premiums;
  • Nearly three in four firms (74%) plan to pass the law’s higher costs on to their employees by changing plan options, restricting eligibility, or increasing deductibles or co-pays;
  • More than one in ten firms plan to pass on the law’s higher costs by reducing employment (12%) or reducing employer contributions to retirement plans like 401(k)s (11%);
  • More than two in five firms (43%) believe their plans will be subject to the “Cadillac” tax on high-cost plans, with a further 6% saying they are unsure whether their plans will be subject to this new tax;
  • Of those firms offering coverage, 43% are “likely to eliminate or reduce retiree medical programs” as a result of the law’s enactment.

So in sum, the assessment of these employers is bleak – higher costs, higher premiums and co-pays for workers, fewer jobs, smaller retirement contributions, additional taxes, and fewer workers and retirees covered.  Is this what Speaker Pelosi meant when she said we had to pass the health care bill to find out what is in it?